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Document Type

Working Paper

Publication Date



The crowding-out of private donations by government grants is an integral element in designing an efficient method of financing nonprofit activity. This paper looks at elements of crowd-out, both the direct impact on donors and the indirect impact due to the response of nonprofits. We include both a theoretical and empirical analysis of the reactions by donors and nonprofits to an increase in government funding based on data from the League of American Orchestras’ annual reports from 2004-2007. To combat indirect crowd-out, renewed emphasis should be placed on grant design; for direct crowd-out, theories of collective action are appropriate.

Included in

Economics Commons



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